The fact that a country’s economy is healthy and corporate profits are buoyant does not automatically mean that businesses with plenty of money rolling in use it to buy their vehicles as opposed to leasing them. On the contrary: they may be just as likely to husband their cash and use a leasing company’s funds if they possibly can.

Germany’s economic performance during the 2008/9 financial crisis and subsequently has been solid and its corporate sector has remained strong. However this has not prompted more and more firms to invest in what are in effect depreciating assets.

Sixt’s results for the first nine months of 2013 saw leasing revenue grow by 3.4% compared with 2012’s performance, from €282.6m to €292.2m. Much of that expansion was driven by demand from German fleets.

‘Despite a still-tense situation with margins in the leasing industry, the leasing business unit’s revenue margin was 4.8%, and thus higher than the same period last year – 4.5%, and close to the long term target of 5%,’ says a company spokesman.

Canada’s economic performance during the 2008/09 crisis and subsequently has been impressive, but its companies are showing no great inclination to switch away from leasing and spend their cash instead.

Says National Leasing Group president Nicholas Logan: ‘We are having record months and that will continue.’

‘The Canadian domestic market for equipment financing is prospering in spite of troubled times in other parts of the globe,’ says Peter Horan, president and chief executive officer of De Lage Landen Financial Services Canada. ‘The demand for capital assets is still strong and leasing industry consolidation in recent years has provided opportunities for increased market share for participants who are willing to invest.’

Both men are quoted in a recent survey of approaches to the financing of vehicles and other assets in Canada produced by White Clarke Group and Asset Finance International.

LeasePlan entered the Canadian market in January 2014 under a licensing agreement with Canadian fleet management company Foss National Leasing, which will involve the latter operating newly formed subsidiary, LeasePlan Canada.

What appears to affect attitudes towards leasing and the type of leasing employed – operational leasing for instance as opposed to finance leasing, as much as the behaviour of the economy and business profitability is legislation and taxation. The latter includes benefit-in-kind and emission taxation as well as the way in which company accounts are treated for tax purposes.

Special local restrictions – on light commercial leasing in Turkey for instance – have a bearing too, as do cultural influences.

Possibly the country that invented vehicle leasing – packages were available as long ago as the 1950s, the Netherlands has one of the highest penetrations of car leasing in Europe at around one-third according to ALD and Arval. The concept is culturally widely accepted and triggers little debate.

The impact that political decisions can have on fleets and their approach to acquisition was writ large in Australia in 2013.

Last July saw the Australian government announce that it proposed to scrap the statutory formula used to calculate FBT – Fringe Benefits Tax – for salary-sacrificed and company-provided cars. It did so without consulting fleet operators or leasing companies, despite the fact that the system it was proposing to abandon had been in place for a quarter of a century.

‘The change would have put an end to novated leases (leases which are offered by vehicle lessors as part of a salary package) as well as affecting leased vehicles with an element of private use,’ say White Clarke Group/Asset Finance International in their study of Australian vehicle and equipment funding. The subsequent plunge in demand for fleet vehicles was only arrested by an election later in the year, with the new coalition government dropping the proposed FBT change as it had promised to do during the election campaign.

As a consequence says the study, ‘the market has rebounded… this episode is a prime example of the dangers of a government that under-estimates the benefits of asset finance and demonstrates the need for a co-ordinated approach across the industry to keep government informed and on message.’

Something which could have a significant long-term impact on the way in which vehicle leases are treated for accounting purposes is a package of proposals now under discussion. These were developed by the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB).

It will require all leased assets to be placed on a lessee’s balance sheet with the lessee incurring a corresponding liability for future rental payments. Under the current standard, operational leases do not have to be included.

If implemented the new standard will, initially at least, only apply to public companies that already report to IASB/FASB standards. It is nonetheless opposed by Leaseurope, which has recently launched what it refers to as a ‘Leasing for Growth’ campaign.

Its aim is to demonstrate that leasing aids European economic expansion by being a major source of investment support for businesses and the public sector. The underlying message is that attempts to tamper with it could harm growth.

The way in which leasing – in this case operational leasing – can benefit a fast-growing economy is illustrated by what is happening in Turkey. According to figures from the Organisation for Economic Co-operation and Development and Eurostat, it enjoyed an average 5% annual growth in GDP every year between 2002 and 2012.

The OECD adds that it likely to be the fastest-growing economy of any of its member states between now and 2017, with average annual growth of 5.2%.

This has been accompanied by a rapid expansion in contract hire, according to a new report compiled by Frost & Sullivan.

In ‘Strategic Analysis of the Turkish Fleet Leasing Market’ it predicts that sales of vehicles to contract hire companies will reach 123,000 by 2018. That compares with 69,000 in 2012, with the additional support services that usually accompany operational leasing underpinning much of its attraction.

Operational leasing has a strong appeal in more developed markets too, a point made by LeasePlan. Such markets include Switzerland, where LeasePlan can boast a list of clients that includes Philips, Hogg Robinson and Dun and Bradstreet as well as locally based firms.

The line-up includes Allega, a leading Swiss aluminium producer and a subsidiary of Amari Metals Europe for the past five years. All the cars used by its managers and sales staff have been acquired through LeasePlan under operational leases and it is not hard to see why, says Allega board member, Erika Koller.

‘Fleet management is not one of our core competences but we still have to keep an eye on mobility costs,’ she observes. ‘If we don’t, then they can easily get out of hand.

‘Under our agreement with LeasePlan we get straightforward support if there is a breakdown or any damage and we have passed on all the administrative work that arises from maintenance, servicing and invoice handling,’ she continues. ‘That allows us to concentrate on our core business.

‘If we did it all ourselves then I would probably have to deal with 20 different garages.’

It is the support provided by LeasePlan that appeals to Andre Caronni of Philips, who lists part-time responsibility for fleet management at the company’s Swiss operation among his other activities. ‘The support is vital because we have cut back more and more on internal fleet management,’ he explains.

‘We used to have one employee whose sole job it was,’ he says. ‘Now I do it part-time and it takes up no more than 20% of my working day.’

Adding value is essential believes Jeff Hartley, chairman of the Canadian Finance and Leasing Association and Foss National Leasing’s president, as he recently told the Canadian Business Journal (CBJ).

As well as managing maintenance and controlling servicing and repair costs it can include providing fuel cards that show how much fuel was used by each vehicle in a single itemised bill at the end of each month.

‘We can calculate each driver’s taxable benefits,’ he says. ‘It’s a cumbersome task but we’ve developed the tools for it.

‘We provide driver training, check driver records, manage accidents and can dispose of clients vehicles at the end of the lease on their behalf,’ he adds.

He went on to tell the CBJ that Foss National Leasing’s buying power – it is responsible for over 48,000 vehicles – allows it to ring hefty discounts from its suppliers: discounts that firms with ten or 20 cars or vans could not hope to achieve.

There is of course nothing to prevent companies that elect to purchase their vehicles outright or acquire them subject to a finance lease rather than an operational lease buying in some, if not all, of the support services they need. That is one reason why Hooksett, New Hampshire, USA based Merchants Leasing changed its name to Merchants Fleet Management.

‘Most of our existing customers use us for much more than the leasing and financing of their vehicles anyway and it opens up opportunities for us with companies that aren’t interested in leasing and financing, but want management services,’ says sales and marketing vice president, Tom Coffey.

Those services embrace everything from accident management and telematics solutions to driver training and insurance.

Other approaches to mobility

The argument over whether fleet vehicles are owned outright or leased in some way could become an increasingly redundant one in future years as other approaches to mobility are explored. That at least is the view of Felipe Barroso, managing director of Zazcar – Brazil’s first car-sharing operator – as quoted in KMPG’s 2013 Global Automotive Executive Survey.

Though small at present and concentrated in the sprawling metropolis of Sao Paulo, Zazcar is growing rapidly, he says. Its ambition is to run a 3,000-strong fleet and it is targeting business users as well as private motorists.

‘Apartment blocks are a further source of new customers, with residents having shared access to cars within the complex,’ he says.

Daimler Mobility Services plans further expansion of its car2go sharing programme in 2014. It is now available in 25 cities worldwide, with the number of monthly rentals recently exceeding 1m.

Perhaps companies will increasingly be looking at a flexible matrix of transport provision for their staff: one of which will include shared cars and public transport with the aim of getting employees to their destinations in as cost-effective and environmentally-friendly a manner as possible.

‘We need to align Zazcar with other parts of the transportation jigsaw,’ says Barroso. ‘One way of doing so would be by integrating our Zazcards with the RFID cards used on public transport networks.’

One suspects however that it will be some time before the company car, however funded and managed, disappears entirely: and any driver of a company van will tell you that boarding a bus or a tram with a pallet stacked with goods is not exactly practical.